TAXES
Once a property has been purchased, a copy of the Sales Contract, the Vendor’s property Title Certificate and the Vendor’s and Purchaser’s personal identification documents are deposited at the DGII, in order to request authorization to pay the Transfer Tax.
Transfer Tax
Law 173-07 dated 17th July 2007 reduced the Transfer Tax to only three percent (3%) of the price of the property stipulated in the Sales Contract or the price resulting from the valuation carried out by the DGII, whichever one is higher. The DGII has the right to inspect the property before authorizing the payment of the tax. This tax must be paid within the six (6) months following the signing the Sales Contract. Unless otherwise agreed by the Vendor and the Purchaser, the Transfer Tax is paid by the Purchaser.
Once the transfer tax has been paid, the originals of the Sales Contract, original property Title Certificate, and the receipt of transfer tax payment, issued by the DGII, are filed with the Title Registry office in the jurisdiction where the property is located. The Title Registrar registers the purchase in its records, cancels the Vendor’s Title Certificate and issues a new Title Certificate in favor of the Purchaser. The issuance of this Title Certificate takes between 30 and 90 days.
Tax on Real Estate Property, Sumptuary Housing and Vacant Urban Lots
Houses and apartments; commercial establishments and vacant lots; located in urban zones, whose value is over five million pesos (RD$5,000,000.00) - The one percent (1%) rate applies to the value which exceeds the RD$5,000,000.00. Those exempted from this tax payment are:
1. Housings whose value is less than Five Million Pesos (RD$5,000,000.00);
2. Housings whose owners have reached sixty five (65) years of age, as long as these housings have not been transferred in the past fifteen (15) years, and the owner only possesses such housing as his/her only real estate property.
3. Buildings and lots owned by the Dominican State, Beneficial Institutions, Religious Organizations and Diplomatic Delegations.
Tax on Assets (ISA).
The ISA is the tax of one percent (1%) annually applied over the total value of the taxable actives of companies or natural persons with a sole-owner business or businesses, including real estate properties listed in the balance sheet, not adjusted by inflation and after the deductions that may apply. The ISA must be paid by all natural persons with one-owner business or businesses and by companies, without mattering if they have operations or not.
Income Tax (ISR)
The ISR is the annual tax applied to all income, utility or profit obtained by juridical persons (companies) or natural persons in a determined tax period. Foreigners must pay the tax over their Dominican sourced income, and starting from their third residency year in the country they must pay over their income from foreign sources. The branches of foreign companies receive the same fiscal treatment as Dominican companies. The ISR rate applied to juridical persons or companies from the year 2007 on is 25% over the net profits of each fiscal year. The ISR rate applied to natural persons from the year 2007 on is of 25%, with a tax payment exemption for the first RD$257,280.00 according to the following scale, which is adjustable by inflation annually:
* From RD$0.00 to RD$257,280.00 – exempt;
* From RD$257,280.01 to RD$385,920.00 – 15%;
* From RD$385,920.01 to RD$536,000.00 – 20%; and
* From RD$536,000.01 onwards – 25%.
The employer must withhold this tax payment from the salary paid to the employee.
Capital Gains Tax
The tax for capital gain is of 25% of the difference between the purchase price and sale price of the real estate property. In the case that the profit is obtained by a natural person, it will pass on to be part of his/her taxable income mass over which the income tax will be applied, after discounting the tax payment exemption, which is of RD$257,280.00 and, from there on, progressive rates going from 15% to 25% will be applied.
In the case that the profit is generated by a company, this profit is presented separately from the operational results of the said company and the 25% tax will be applied, regardless of the operational result of the company.
Tax on Rent of Real Estate.